Homeownership in 2025: Still the Goal, or Are We Over It?
Are we still supposed to want home ownership? What happened to the “home buying” dream we’ve been fed since childhood, is it still valid? Because the way these home prices are looking, I’m starting to rethink if it’s the right choice for me. I mean, at this rate, I’d be lucky to own a room at the Motel 6 up the street. It makes me question: is owning a home still worth it in 2025? 🏡
I’ll admit that lately, I’ve been thinking more and more about making the leap to homeownership. Rent prices are on the rise, and I wonder if I’m better off putting that money toward a home that I can own rather than an apartment. But do I really want to give up what little financial freedom I have for the sake of wearing the badge of “homeowner”? I’m not so sure. But before making any moves, I knew I’d at least have to make sure I was informed on everything I’d be getting myself into if I were to make such a big decision. So I did some research (which I actually enjoyed more than I thought I would, should I go back to school?? 🎓).
What I found is that it’s definitely still possible to achieve home ownership as a millennial in 2025! It just looks a little different than we’d thought, and it costs a whole lot more than it ever did before. Here’s what you should know if you’re considering buying a house in 2025:
Will home prices finally go down in 2025?
Sadly, the short answer is: no. The more detailed answer is: it’s complicated. To know what to expect for 2025, we have to take a look at how the housing market performed in 2024. In 2024, Forbes experts saw a somewhat steady price decrease over the year. For example, we saw a 4.8% price growth rate in July fall to a 4.2% growth rate in September. And the good news is that experts forecast a continued decrease in home prices leading into 2025.
But despite the hopeful prediction, the truth is: median home prices have surged nearly 50% over the past 5 years, with no signs of returning to the pre-pandemic prices.
If the prices aren’t going down, then why is there such a high housing demand?
According to Forbes, which tracked housing trends over the last year, mortgage rates play a big role in this. First off, we need more homes going up for sale. But the thing is, homeowners don’t want to sell if the mortgage rates are so high.
Imagine you purchased a home in 2019, pre-pandemic, when the average 30-year fixed rate mortgage was 3.94%. If you paid the average home price at that time of $384,600 with a 3% down payment, your monthly mortgage would be around $2,000. If you were to sell your home and buy a new one at the 2024 average price of $420,400, you’d be looking at a monthly mortgage of around $3,000 due to the current 6.9% mortgage rate. Homeowners don’t want to give up their locked-in low mortgage rates for higher rates. They call this the “lock-in effect” [Business Insider].
So, if people aren’t selling their homes, what does that mean for those of us looking to buy?
It means that affordability is still going to be a challenge for those of us looking to buy a home in 2025. The combination of high mortgage rates, steep home prices and insufficient inventory levels point to 2025 being another tough year for homebuyers [Forbes].
If I do decided to buy I this market, how much can I expect my average monthly mortgage payment to be?
According to the Monthly Bankers Association, the median monthly mortgage payment for a new homeowner is around $2,617. This varies by location, and it doesn’t include additional costs like property taxes, homeowners insurance, and potential HOA fees. For example, in California, the average monthly mortgage would be around $4,116.
Is buying a home in 2025 even worth it anymore?
In the opinion of Forbes and Amy Lessinger (CEO of RE/MAX), housing still remains a reliable long-term investment [Forbes]. However, in my own opinion, I think this largely depends on everyone’s individual financial situations and timing.
Can I just wait for another housing market crash so I can swoop up a home for cheap?
The odds of another housing market crash happening, like it did in 2008, are slim to none. The 2008 housing market crash was due to a unique set of circumstances that just aren’t present in today’s market. Plus, the record low supply of houses on the market protects against a market crash [Forbes]. Basically, housing demand is too high for that to be a possibility.
What if I’m not ready to buy a house yet? What can I do to prepare?
If you find that you’re not quite ready to take that leap into homeownership, that’s perfectly fine. The main takeaway for me is: buy a house when you’re financially ready, and don’t try to time the market. Until then, just save up so when the opportunity comes to buy a home, you’re ready for it. Business Insider suggests several ways you can prepare to buy a house until the time is right:
- Get your finances together
- Whether you need to pay off or pay down some credit cards or loans, now’s a good time to do it. Start with the highest interest rates first, and then tackle the smallest balances.
- Look for first-time homebuyer assistance
- If you’re worried about getting enough money together for your down payment, take some time to look up the different home-buying programs that can offer assistance, like FHA, your bank, or other local institutions.
- Don’t be in a hurry
- Don’t put pressure on yourself to make any hasty decisions! This could be the biggest asset and financial decision of your life. If you don’t feel ready to buy in 2025, there’s nothing wrong with waiting it out a bit, saving, and working on your credit.
- Stack your savings
- It never hurts to have extra cash going into a big purchase like this. Having money set aside for unexpected costs will help prevent debt when your first big housing expenses come along. Something else to consider is that the more you can put down, the better your interest rate will likely be, and offers with larger down payments catch the attention of home sellers, giving you a competitive edge!
In the end, homeownership is just one way to achieve stability and happiness, and it’s perfectly okay to choose the path that feels right for you. If any of you do make the leap in homeownership this year, I’d love to hear about how it went for you! Reach out or drop a comment below 🙂
Sources:
